A Checklist for Year-End Tax Planning

Year end is a crucial time in a tax strategy. Once the year has ended some tax opportunities are lost forever.

Here's the checklist of important points to consider:

#1 MAKE SURE YOUR RECORDS ARE CURRENT

Every single transaction should be posted as of the last month of the taxable year. Current expenses are for items that benefited your business for less than one year.

#2 DETERMINE YOUR VEHICLES' MILEAGE

Keep track of how many business activity miles you drive. Your mileage log document is important to support your mileage deduction.

#3 CHECK YOUR ACTIVITY LOG FOR REAL ESTATE HOURS

If you are a "Real Estate Professional" in the U.S., documenting your real estate hours is one of the best ways to limit the financial impact of taxes. More than 750 hours of material participation in real estate activities is considered.

#4 TRACK YOUR SALARY FROM THE BUSINESS

Make the necessary adjustments now if changes are needed to be made regarding the amount of salary you received from the business.

#5 REVIEW RETIREMENT PLAN CONTRIBUTIONS

If your business had a retirement plan for you and/or other employees, evaluate the year to date contributions and what contributions you want to make before year-end in line with your tax strategy.

#6 TRACK YOUR LOAN AND INTEREST PAYMENTS

Any borrowing of funds between your entities should be properly documented including your personal loans to or from the business. Make sure the loan and interest payments are paid in accordance with the terms stated on loan contracts. Secure or finalize your loan contracts before the year ends.

#7 CHECK THE DOCUMENTATION FOR DEDUCTIONS

Properly documented expenses are considered legitimate deductions. This includes your travel, meals & entertainment, home office and vehicle. Make sure receipts are available and they tally with your records.

#8 GET REIMBURSEMENTS FOR YOUR BUSINESS EXPENSES

Submit an expense claims report complete with all the receipts and invoices as proof. Don't overlook these expenses that could also increase your tax deductions. Now, if your business doesn't have a policy in place to reimburse you for these expenses, it's time to create one.

#9 ADD A NEW ENTITY

Entities are one of the most effective tools to reduce taxes. Knowing the right time to add an entity and knowing the right entity to add can save as much as $10,000 per year in taxes. However, the new entity needs to perform its distinct operations to reflect its own business structure in order for the tax savings to occur.

#10 CHANGE HOW THE NEW ENTITY SHOULD BE TAXED

Once the new entity reaches a certain level of income, to change how it should be taxed is another tax strategy. So an election within your business is necessary and not making it at an ideal time can be a very costly tax mistake.

#11 SET AN ANNUAL MEETING WITH MEETING MINUTES ON HAND

Meeting minutes is an ideal place to document the activity in your tax strategy. All the items on this list should be tackled down thru this meeting. Annual meeting should be part of year-end tax strategy all the time.

#12 LEARN FROM THIS YEAR AND PREPARE FOR NEXT YEAR

In addition, if you find yourself spending an excessive amount of time at the end of the year updating records and gathering supporting data for taxes, learn from the experience and make the new tax year easier for you by hiring a professional bookkeeper. Knowingly an organized business and accounting records will cost you a great deal of tax savings in the end. Have more time for what you do best - managing business operations and strategizing for growth and development. Leave everything else to the expert.